Biostage Declares Reverse Stock Split Effective December 22, 2017

Biostage, Inc. (OTCQB: BSTG), (“Biostage” or the “Company”), a biotechnology company developing bioengineered organ implants to treat cancers and other life-threatening conditions of the esophagus, bronchus and trachea, recently declared a reverse stock split of its shares of common stock at a ratio of 1-for-20. The Company’s common stock will begin trading on a post-split basis on Friday, December 22, 2017. Upon the beginning of trading on December 22, 2017, the Company’s symbol on the OTCQB marketplace will change to “BSTGD” for a period of 20 business days, after which the “D” will be removed from the Company’s trading symbol, which will revert to the original symbol of “BSTG”. In connection with the reverse stock split, the CUSIP number for the common stock has been changed to 09074M202.

The reverse stock split was implemented by the Company in order to satisfy a condition to closing following the binding Memorandum of Understanding (the “MOU”) reached between the Company and a private shareholder on December 11, 2017 for the private placement of shares of the Company’s common stock, or a convertible preferred equivalent, and warrants to purchase shares of the Company’s common stock, or a convertible preferred equivalent, for gross proceeds of about $4.0 million.

Jim McGorry, CEO of Biostage stated, “The implementation of this reverse stock split is a noteworthystep in moving Biostage closer towards funding and closing the private placement, which we expect will allow us to re-establish normal operations at a more efficient size and structure and fund the promise of our technology.”

The reverse stock split was formerly authorized at the annual meeting of the Company’s stockholders on April 26, 2017, and the Company’s Board of Directors approved the ratio and timing of the reverse stock split on December 11, 2017. The reverse stock split became effective at 12:01 a.m. on December 22, 2017.

As a result of the reverse stock split, the total number of shares of common stock held by each stockholder will be converted automatically into the number of whole shares of common stock equal to (i) the number of shares of common stock held by the stockholder right away before the reverse stock split, divided by (ii) 20. As a result of the reverse stock split, the Company’s issued and outstanding shares of common stock will decrease to about 2.0 million post-split shares (before effecting the rounding of fractional shares into whole shares as described below) from about 39.8 million pre-split shares.

No fractional shares will be issued. Instead, the Company will pay cash to any stockholder holding fractional shares as a result of the reverse stock split equal to such fraction multiplied by $1.32, which represents the closing price per share of $0.066 for the common stock on the OTCQB marketplace as of December 21, 2017, as adjusted to reflect the reverse stock split.

The par value and other terms of the common stock will not be affected by the reverse stock split. The authorized capital of the Company of 120,000,000 shares of common stock and 2,000,000 shares of preferred stock also will not be affected by the reverse stock split.

The Company has retained its transfer agent, Computershare, to act as exchange agent for the reverse stock split. Computershare will manage the exchange of pre-split shares for post-split shares. Stockholders of record will receive a letter of transmittal providing instructions for the exchange of their shares. Stockholders who hold their shares in street name will be contacted by their banks or brokers with any instructions. For further information, stockholders and securities brokers should contact Computershare at (800) 522-6645.

All options and warrants of the Company outstanding right away before the reverse stock split will be appropriately adjusted. In general, the reverse stock split will effect a reduction in the number of shares of common stock subject to such outstanding stock options and warrants proportional to the exchange ratio of the reverse stock split and will effect a proportionate increase in the exercise price of such outstanding options and warrants.